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EXHIBIT 10.9
TECHNOLOGY LICENSE AGREEMENT
THIS TECHNOLOGY LICENSE AGREEMENT (this "Agreement") is entered into as
of the 1st day of May, 1999, by and between 1ST NET TECHNOLOGIES, INC., a
Colorado corporation (referred to as "1st NET" or the "Licensor"), and THE
CHILDREN'S TECHNOLOGY GROUP, INC., a Nevada corporation (referred to as "CTG" or
the "Licensee").
RECITALS
A. Licensor is the developer and owner of certain rights, in and to
the "MindWalker" web browsers and community software programs ("MindWalker").
B. Licensee desires to acquire a non-exclusive license to use and
distribute the MindWalker web browser and an exclusive license to develop and
distribute a web browser for the teenage market based on "MindWalker"
technology. Licensor is willing to grant such license, all on the terms and
conditions of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the recitals and the mutual
covenants and conditions contained herein, the parties agree as follows:
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1. DEFINITIONS. Unless a contrary interpretation is required by the
specific context, the following terms shall have the following definitions,
whether used in the singular, plural, possessive or other such form:
1.1 "PRODUCT" shall mean the product of Licensee which, in
the absence of this Agreement, would infringe Licensor's rights in the
trademarks and/or the Technology.
1.2 "TECHNOLOGY" shall mean any and all confidential
information, inventions, know-how, data, trade secrets, whether or not
patentable, including any trademarks, tradenames, copyrights and other
intellectual property rights based on the Products and/or related to the
MindWalker web browser.
1.3 "MODIFICATIONS, IMPROVEMENTS AND ENHANCEMENTS" shall
mean any technology in addition to or substitution for existing technology and
which requires the use of existing technology to operate.
2. GRANT OF NON-EXCLUSIVE AND EXCLUSIVE LICENSES.
2.1 LICENSE. Licensor hereby grants to Licensee, and
Licensee hereby accepts from Licensor, upon the terms and conditions contained
in this Agreement, a worldwide non-exclusive license to use, market and sell the
MindWalker web browser, and exclusive rights to develop a MindWalker web browser
for the teenage market.
2.2 MODIFICATIONS, IMPROVEMENTS AND ENHANCEMENTS BY
LICENSOR. The License shall extend to any Modifications, Improvements or
Enhancements in the Technology hereafter developed by Licensor. Licensor will
supply all such Modifications, Improvements and Enhancements to Licensee as soon
as practicable following their development; however, Licensor shall have no
obligation to make any Modifications, Improvements and Enhancements. Licensor
shall notify Licensee of the date upon which each Modification, Improvement or
Enhancement shall be deemed to be a part of the License under this Agreement.
2.3 MODIFICATIONS, IMPROVEMENTS AND ENHANCEMENTS BY
LICENSEE. Licensee shall have the right to modify, improve and enhance the
Technology from time to time. Licensee shall, within thirty (30) days, forward
to Licensor a description of any such Modification, Improvement or Enhancement.
Upon termination of this Agreement,
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Licensee shall not have any ownership with respect to rights to any such
Modification, Improvement or Enhancement. Licensee agrees to defend Licensor in
any claim, lawsuit or other proceeding that may hereafter be made or filed which
is based on, related to or connected with any Modification, Improvement or
Enhancement affected by Licensee pursuant to this Section 2.3.
2.4 RIGHTS EXCLUDED. The License shall not include the
rights to manufacture, reproduce, publish, transfer, market, distribute,
sublicense, assign or sell the Technology in any transfer medium whatsoever
except as expressly provided in this Agreement.
2.5 TITLE. Licensee hereby acknowledges that Licensor
retains title to the Technology and shall have and retain title to any
Modifications, Improvements and Enhancements made to the Technology by any party
and that Licensee acquires only a License to specific rights as set forth in
this Agreement. Licensor shall grant to Licensee a license with respect to any
Modifications, Improvements or Enhancements developed by Licensor in accordance
with Section 2.2 of this Agreement.
3. TRADEMARKS, TRADENAMES AND COPYRIGHTS.
3.1 SOLE PROPERTY OF LICENSOR. In addition to Technology,
all trademarks, tradenames and copyrights granted or applied for in connection
with the Technology are, will and shall remain the sole property of Licensor.
Any direct or indirect use, publication or reference to Licensor's name,
trademarks, or tradenames, except as specified in this Agreement or as expressly
authorized by Licensor in writing, is prohibited.
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3.2 USE OF LICENSOR'S TRADEMARKS, TRADENAMES AND COPYRIGHTS.
Licensee may use Licensor's trademarks, tradenames and copyright on products as
follows:
MindWalker
3.3 EFFECT OF TERMINATION OR EXPIRATION. Upon termination or
expiration of this Agreement, the right of Licensee to use Licensor's tradenames
and trademarks shall cease immediately.
4. WARRANTIES AND INDEMNIFICATION.
4.1 Licensor represents and warrants that it is the owner of
the entire right, title and interest in and to the trademarks above and the
Technology, and that it has the full right, power and capacity to enter into
this Agreement and to lawfully grant the exclusive rights granted to Licensee
hereby. Licensor further warrants that, except as otherwise provided in this
Agreement, it will not take any action, or fail to take any action during the
term of this Agreement, that would negate this Agreement or cause a loss to
Licensee of the License granted hereunder.
4.2 Licensor represents and warrants that it is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Colorado; has the power and authority to enter into this
Agreement; all corporate and other action required to be taken on behalf of
Licensor to authorize the execution and delivery of this Agreement, and to carry
out the transactions contemplated herein, have been duly and properly taken.
4.3 Licensee shall defend at its own cost any infringement
suit that may be brought against Licensee or Licensor on account of the
development, manufacture,
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production, use, or sale of the Technology or of any Product sold by Licensee,
and shall indemnify and save Licensor harmless against any such patent or
similar infringement suits, and any claims, losses, damages, liabilities or
expenses, including reasonable attorneys' fees and costs, which may be incurred
by Licensor therein or in settlement thereof. Any and all settlements must be
approved by Licensor before execution by Licensee.
4.4 LICENSOR DOES NOT WARRANT THE ADEQUACY OF THE TECHNOLOGY
AND DOES NOT WARRANT, EXPRESSLY OR IMPLIEDLY, THE MERCHANTABILITY, SUITABILITY
OR FITNESS THEREOF FOR ANY PURPOSE WHATSOEVER. EXCEPT AS OTHERWISE SET FORTH IN
THIS SECTION 4, LICENSOR DISCLAIMS ALL OTHER WARRANTIES OF WHATEVER NATURE,
EXPRESS OR IMPLIED.
5. DOCUMENTATION AND CONFIDENTIAL INFORMATION.
5.1 PROTECTION OF CONFIDENTIAL PROPRIETARY INFORMATION.
Licensee shall protect all documents, information and data supplied by Licensor
and designated as confidential and proprietary to Licensor. Each party shall
promptly report to the other any unauthorized disclosures or misuse of such
information and data of which such party becomes aware or has reasonable cause
to believe has occurred. Licensee agrees to immediately notify Licensor of any
Modification, Improvement or Enhancement to the Licensed Software developed by
Licensee and to provide details thereof to Licensor.
5.2 CONFIDENTIALITY AGREEMENTS. Concurrent with the
execution of this Agreement, Licensee agrees to execute Licensor's standard form
Confidentiality Agreement of which is attached hereto as Exhibit "A". Licensee
also agrees to require
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its employees and representatives with access to the Technology and other
documents or materials designated by Licensor as confidential and proprietary to
execute the standard form Confidentiality Agreement and to execute any other
instruments or documents Licensor deems necessary or advisable in order to
protect its trade secrets and any other confidential and proprietary
information.
5.3 EFFECT OF TERMINATION OR EXPIRATION. Upon termination or
expiration of this Agreement, Licensee shall cease all use of and, at its own
expense, immediately return to Licensor, at Licensor's principal offices or such
other location as Licensor may designate, all copies of any diskettes, source
codes, tapes, recordings, manuals, books, or other electronic or written
materials relating to the Technology or any tradenames, trademarks or logo types
relating to Licensor regardless whether prepared by Licensor or Licensee,
including all copies of materials containing information or data supplied by
Licensor and designated by Licensor as confidential and proprietary.
6. TERM AND TERMINATION.
6.1 SINGLE TERM. This Agreement shall be for a single term
commencing on the date hereof and expiring three (3) years from the date hereof,
unless sooner terminated as provided for herein. Licensor and Licensee shall
have no obligation, nor has either made any promise, whether express or implied,
to renew or extend this Agreement beyond the term thereof. Licensor and Licensee
shall each have the absolute right, in their sole discretion, to determine
whether to renew or extend this Agreement, regardless of whether and to what
degree the other party has performed its obligations hereunder.
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6.2 TERMINATION. Either party may terminate this Agreement
effective immediately on delivery of written notice of the same to the other
party for any of the following:
6.2.1 Mutual agreement of the parties hereto;
6.2.2 Commission of a material breach of the
Agreement; or
6.2.3 The filing or submission of any petition in
bankruptcy by or against a party to this Agreement or any of its subsidiaries
dealing in the Technology, or upon occurrence of any other act of insolvency by
a party to this Agreement or such subsidiaries; provided, in the event that a
party declines to exercise its termination rights upon the bankruptcy or
insolvency of the other, this Agreement shall remain in full force and effect
and binding upon the bankruptcy or insolvent party.
6.3 CONTINUING OBLIGATIONS OF LICENSEE. Notwithstanding
termination of this Agreement, whether by expiration of its term or otherwise,
Licensee shall remain obligated to do the following:
6.3.1 To indemnify and defend Licensor as provided in
this Agreement; and
6.3.2 To maintain the confidentiality of any and all
of Licensor's data or information designated as confidential and proprietary.
6.4 NO CONTINUATION OF LICENSOR'S OBLIGATIONS. Upon
termination of this Agreement and without prejudice to any claims which Licensee
may have against Licensor immediately prior to such termination or arising
therefrom, Licensor's obligations under the Agreement shall cease immediately.
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7. MISCELLANEOUS PROVISIONS.
7.1 ASSIGNMENTS. Neither this Agreement nor any rights or
obligations of Licensee hereunder shall be assignable by Licensee in whole or in
part, by operation of law or otherwise, without the prior written consent of
Licensor, which may be granted or withheld in Licensor's sole discretion.
Subject to the foregoing, this Agreement shall be binding upon and shall inure
to the benefit of the successors and assigns of the respective parties hereto.
7.2 HEADINGS. The headings of the articles, paragraphs and
clauses used in this Agreement are included for convenience only and are not to
be used in interpreting or construing this Agreement.
7.3 GOVERNING LAW. This Agreement and all disputes
concerning its execution, formation, interpretation, performance, breach,
termination, validity, or enforceability shall be governed by the laws of the
State of California as applicable to contracts made between residents of
California, regardless of the laws which may otherwise be applicable under
principles of conflicts of laws.
7.4 WAIVER. No claim or right arising out of a breach of
this Agreement can be discharged in whole or in part by a waiver of the claim or
right unless it is in writing and signed by the aggrieved party.
7.5 NOTICES. All notices and other communications required
herein shall be in writing and shall be either delivered personally or be
dispatched by facsimile or sent by certified mail, postage prepaid, return
receipt requested. Items delivered personally shall be deemed delivered one day
after dispatch; items sent by certified or registered mail shall be deemed
delivered three (3) days after mailing. The addresses of the parties for
purposes of this provision are:
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LICENSOR: Attention: Chief Executive Officer
1st Net Technologies, Inc.
00000 X. Xxxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
WITH A COPY TO:
R. Xxxxx Xxxxxxx
The Xxxxxxx Group, LLP
00000 X. Xxxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
LICENSEE: The Children's Technology Group, Inc.
00000 X. Xxxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Either party may change its address by giving notice thereof as required herein.
7.8 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto, and shall supersede the terms and
conditions of any and all prior agreements, understanding, promises,
representations and writings made by either party to the other concerning the
subject matter and the terms and conditions hereof. No subsequent modification,
amendment, or extension of this Agreement or any of the terms and conditions
hereof shall be of any force or effect unless it is in writing and signed by a
duly authorized officer or representative of each of the parties.
7.9 SEVERABILITY. The unenforceability, invalidity or
illegality of any provisions of this Agreement shall not render the other
provisions unenforceable, invalid or illegal.
7.10 COUNTERPARTS. This Agreement may be executed in
counterparts with the same force and effect as if all signatures appeared on the
same document.
[SIGNATURES ON NEXT PAGE]
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IN WITNESS WHEREOF, each of the parties have caused this Agreement to be
executed by its duly authorized officer as of the day and year first written
above.
1ST NET TECHNOLOGIES, INC.,
a Colorado corporation
/s/ Xxxxxxx X. Writer, Jr.
----------------------------------------
Xxxxxxx X. Writer, Jr.,
Chief Executive Officer
THE CHILDREN'S TECHNOLOGY GROUP, INC.,
a Nevada corporation
/s/ Xxxxxxxx X. Xxxxxxx
----------------------------------------
Xxxxxxxx X. Xxxxxxx,
Chief Financial Officer
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EXHIBIT "A"
CONFIDENTIALITY AGREEMENT
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WARRANT AGREEMENT
BY AND AMONG
1ST NET TECHNOLOGIES, INC.
AND
TUMMY BUSTERS, INC.,
d.b.a.
CHILDREN'S TECHNOLOGY GROUP
Dated as of April 19, 1999
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TUMMY BUSTERS, INC.
WARRANT AGREEMENT
WARRANT TO PURCHASE SHARES OF COMMON STOCK
VOID AFTER APRIL 19, 2002
This certifies that 1st Net Technologies, Inc. ("1st Net"), or any party
to whom this Warrant is assigned (1st Net and such assignee hereinafter
collectively "Holder"), is entitled to subscribe for and purchase 4,000,000
shares (as constituted on the date of issuance hereof) of the fully paid and
nonassessable Common Stock, no par value (the "Common Stock"), of Tummy Busters,
Inc., a Nevada corporation doing business as "Children's Technology Group" (the
"Corporation"), subject to the provisions and upon the terms and conditions
hereinafter set forth. The purchase price of each such share shall be $0.10 per
share, as adjusted herein (the "Warrant Price"). The number and character of
such shares of Common Stock are subject to downward adjustment as provided
below, and the term "Common Stock" shall mean, unless the context otherwise
requires, the stock and other securities and property at the time receivable
upon the exercise of this Warrant. The term "Warrant" as used herein shall
include this Warrant and any warrant(s) delivered in substitution or exchange
therefor as provided herein.
1. CONSIDERATION; APPOINTMENT OF NEW MANAGEMENT. As consideration
for the issuance of this Warrant, the parties shall have entered into that
certain Technology License Agreement of even date herewith a true and correct
copy of which is attached hereto as Exhibit "A" (by which 1st Net grants the
Corporation an exclusive license and marketing rights to the "Crayon Crawler"
web browser and community software program), and the Corporation shall have paid
1st Net pursuant thereto cash consideration in the amount of $400,000. As
further consideration, concurrently with the execution and delivery hereof the
Corporation (i) shall have entered into that certain additional Technology
License Agreement with 1st Net a true and correct copy of which is attached
hereto as Exhibit "B" (by which the Corporation grants an exclusive license to
1st Net for x-xxxx.xxx) and (ii) shall hereby remove the existing officers and
directors of the Corporation and appoint (a) Messrs. Xxxxxxx X. Writer, Jr.,
Xxxxxxxx X. Xxxxxxx and Xxxxx X. Xxxxxx, Xx., and Xx. Xxxxxx Xxxxxx, as members
of the Board of Directors, and (b) Xx. Xxxxxxx X. Writer as Chairman, Chief
Executive Officer, and President, Xx. Xxxxxxx Xxxxxxxxx as Vice President,
Investor Relations, Xx. Xxxxxxxx X. Xxxxxxx as Chief Financial Officer and
Treasurer, and Xx. Xxxxxx Xxxxx as Secretary, of the Corporation.
2. METHOD OF EXERCISE; PAYMENT. The purchase right represented by
this Warrant may be exercised by Holder, in whole or in part, by the surrender
of this
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Warrant (with the subscription form attached hereto duly executed) at the
original office of the Corporation located at 00000 Xxxx Xxxxxxxx Xxxxx, Xxx
Xxxxx, Xxxxxxxxxx 00000 and by the payment to the Corporation, by certified or
cashier's check, of an amount equal to the aggregate Warrant Price of the shares
of Common Stock being purchased. In the event of any exercise of the rights
represented by this Warrant, certificates for the shares of Common Stock so
purchased shall be delivered to Holder within thirty (30) days of the surrender
of this Warrant (with the subscription form attached hereto duly executed) and,
unless this Warrant has been fully exercised or expired, a new Warrant
representing the aggregate purchase price of shares with respect to which this
Warrant shall not then have been exercised shall also be issued to Holder within
such time. A Warrant shall be deemed to have been exercised immediately prior to
the close of business on the date of its surrender for exercise as provided
above, and the person entitled to receive the shares of Common Stock issuable
upon such exercise shall be treated for all purposes as the holder of such
shares of record as of the close of business on such date.
3. STOCK FULLY PAID; RESERVATION OF SHARES. The Corporation
covenants and agrees that all securities which may be issued by the Corporation
upon the exercise of the rights represented by this Warrant in accordance with
its terms will, upon issuance, be fully paid and nonassessable and free from all
taxes, liens and charges of the Corporation with respect to the issue thereof.
The Corporation further covenants and agrees that, during the period within
which the rights represented by this Warrant may be exercised, the Corporation
will at all times have authorized and reserved for issuance a sufficient number
of shares of its Common Stock or other securities as would be required in the
event of the full exercise of the rights represented by this Warrant. The
Corporation will not, by amendment of its Articles of Incorporation or through
reorganization, consolidation, merger, dissolution, issue or sale of securities,
sale of assets or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the Holder against dilution or other impairment.
4. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The applicable
Warrant price from time to time in effect and the number of shares of Common
Stock receivable upon exercise of this Warrant shall be subject to downward
adjustment from time to time after the date hereof as follows:
4.1 ADJUSTMENT TO WARRANT PRICE FOR CERTAIN DILUTING ISSUES.
4.1.1. SPECIAL DEFINITIONS. For purposes of this
Article 4, the following definitions shall
apply:
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(1) `ADDITIONAL SHARES OF COMMON STOCK' shall mean
all shares of Common Stock issued (or, pursuant
to Section 4.1.3, deemed to be issued) by the
Corporation after the Original Issue Date, other
than shares of Common Stock issued or issuable:
(A) to officers, directors or bona fide
employees of, or consultants to, the
Corporation pursuant to stock option or
stock purchase plans or agreements on
terms approved by the Board of
Directors;
(B) upon exercise of this Warrant; or
(C) for which adjustment of the Warrant
Price is made pursuant to Section 4.2.
(2) `BUSINESS DAY' means any day other than a
Saturday, Sunday, or a day on which banking
institutions in the State of New York are
authorized or obligated to be closed by law or
by executive order.
(3) `COMMON STOCK MARKET PRICE' of one share of
Common Stock at any date shall be deemed to be,
if the shares of the Corporation are
publicly-traded, the average of the daily
closing prices for the five (5) consecutive
Business Days ending two (2) Business Days
before the day in question (as adjusted for any
stock dividend, split, combination or
reclassification). The closing price for each
day shall be the last reported sales price or,
in case no such reported sales take place on
such day, the last reported bid price, in either
case on the principal national securities
exchange on which the Common Stock is listed or
admitted to trading or the last reported sales
price on the National Market System ("NMS") of
the National Association of Securities Dealers
Automatic Quotation System ("NASDAQ"), or if the
Common Stock is not included in the NMS, the
average of the reported last closing bid and
asked prices on NASDAQ, or if not listed or
admitted to trading on any national securities
exchange or NASDAQ, the average reported bid
price as furnished by The National Quotation
Bureau, Incorporated (or the equivalent
recognized source of quotations), all as
adjusted. If the Shares of the Corporation are
not publicly-traded, the Common Stock Market
Price shall be deemed $0.10 per share. The sale
of Common Stock in a bona fide underwritten
public offering shall be deemed a sale of Common
Stock at the Common Stock Market price,
notwithstanding the immediately preceding
sentence.
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(4) `CONVERTIBLE SECURITIES' shall mean any
evidences of indebtedness, shares (other than
Common Stock or this Warrant) or other
securities convertible into or exchangeable for
Common Stock.
(5) `OPTIONS' shall mean rights, options, or
warrants to subscribe for, purchase or otherwise
acquire either Common Stock or Convertible
Securities.
(6) `ORIGINAL ISSUE DATE' shall mean April 19, 1999,
the date on which this Warrant was first issued.
4.1.2 NO DOWNWARD ADJUSTMENT OF WARRANT PRICE. No
decrease in the Warrant Price shall be made in
respect of the issuance of Additional Shares of
Common Stock unless the consideration per share
for an Additional Share of Common Stock issued
or deemed to be issued by the Corporation is
less than the lower of the Warrant Price or the
Common Stock Market Price in effect on the date
of, and immediately prior to, such issue. No
increase in the Warrant Price shall be made in
respect of the issuance of Additional Shares of
Common Stock.
4.1.3. DEEMED ISSUE OF ADDITIONAL SHARES OF COMMON
STOCK. In the event the Corporation at any time
or from time to time after the Original Issue
Date shall issue any Options or Convertible
Securities or shall fix a record date for the
determination of holders of any class of
securities then entitled to receive any such
Options or Convertible Securities, then the
maximum number of shares (as set forth in the
instrument relating thereto without regard to
any provisions contained therein designed to
protect against dilution) of Common Stock
issuable upon the exercise of such Options or,
in the case of Convertible Securities and
Options therefor, the conversion or exchange of
such Convertible Securities, shall be deemed to
be Additional Shares of Common Stock issued as
of the time of such issue or, in case such a
record date shall have been fixed, as of the
close of business on such record date, provided
that Additional Shares of Common Stock shall not
be deemed to have been issued unless the
consideration per share (determined pursuant to
Section 4.1.5 hereof) of such Additional Shares
of Common Stock would be less than the lower of
the Warrant Price or the Common Stock Market
Price in effect on the date of and immediately
prior to such issue, or such record date, as the
case may be, and provided further that in any
case in which Additional Shares of Common Stock
are deemed to be issued:
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(1) no further adjustments in the Warrant Price
shall be made upon the subsequent issue of
Convertible Securities or shares of Common Stock
upon the exercise of such Options or conversion
or exchange of such Convertible Securities;
(2) if such Options or Convertible Securities by
their terms provide, with the passage of time or
otherwise, for any increase in the consideration
payable to the Corporation, or decrease in the
number of shares of Common Stock issuable, upon
the exercise, conversion or exchange thereof,
the Warrant Price computed upon the original
issue thereof (or upon the occurrence of a
record date with respect thereto), and any
subsequent adjustments based thereon, shall,
upon any such increase or decrease becoming
effective, be recomputed to reflect such
increase or decrease insofar as it affects such
Options or the rights of conversion or exchange
under such Convertible Securities (provided,
however, that no such adjustment of the Warrant
Price shall affect Common Stock previously
issued upon exercise of the Warrant); and
(3) no readjustment pursuant to clause (2) above
shall have the effect of increasing the Warrant
Price.
4.1.4 DOWNWARD ADJUSTMENT OF WARRANT PRICE UPON
ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK.
In the event the Corporation, at any time after
the Original Issue Date shall issue Additional
Shares of Common Stock (including Additional
Shares of Common Stock deemed to be issued
pursuant to Section 4.1.3) without consideration
or for a consideration per share less than the
lower of the Warrant Price or the Common Stock
Market price in effect on the date of and
immediately prior to such issue, then and in
such event, the Warrant Price shall be reduced,
concurrently with such issue, to a price
(calculated to the nearest cent) equal to the
quotient obtained by dividing:
(A) an amount equal to the sum of
(x) the total number of shares of Common
Stock outstanding immediately prior to
such issuance, multiplied by the lower
of the Warrant Price or the Common Stock
Market price in effect on the date of
and immediately prior to such issue,
plus
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(y) the consideration received by the
Corporation upon such issuance;
by
(B) the total number of shares of Common
Stock outstanding immediately after the
issuance of such Common Stock, and
(C) in the event the Common Stock Market
Price in effect on the date of and
immediately prior to such issue is lower
than the Warrant Price in effect on the
date of and immediately prior to such
issue, then by multiplying the resulting
quotient by a fraction, the numerator of
which shall be the Warrant Price in
effect on the date of and immediately
prior to such issue and the denominator
of which shall be the Common Stock
Market Price in effect on the date of
and immediately prior to such issue.
The Warrant Price adjusted as provided above may be similarly readjusted
upward (but not above the initial Warrant Price to reflect the issuance of
shares of Common Stock for a consideration per share greater than the lower of
the Warrant Price or the Common Stock Market Price in effect on the date of and
immediately prior to such issue.
In the event of any adjustment of the Warrant Price as provided in this
Section 4.1.4, then and in each such case Holder, upon the exercise hereof,
shall be entitled to receive, in lieu of the shares of Common Stock theretofore
receivable upon the exercise of this Warrant, a number of shares of Common Stock
determined by (a) dividing the Warrant Price prior to the adjustment by the
adjusted Warrant Price, and (b) multiplying the resultant quotient by the total
number of shares of Common Stock called for by the face of this Warrant.
4.1.5 DETERMINATION OF CONSIDERATION. For purposes of this
Section 4.1, the consideration received by the
Corporation for the issue of any Additional Shares of
Common Stock shall be computed as follows:
(1) CASH AND PROPERTY: Such consideration shall:
(A) insofar as it consists of cash, be computed
at the aggregate amount of cash received by the
Corporation excluding amounts paid or payable
for accrued interest or accrued dividends;
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(B) insofar as it consists of property other
than cash, be computed at the fair market value
thereof at the time of such issue, as determined
in good faith by the Board; and
(C) in the event Additional Shares of Common
Stock are issued together with other shares or
securities or other assets of the Corporation
for consideration which covers both, be the
proportion of such consideration so received,
computed as provided in clauses (A) and (B)
above, as determined in good faith by the Board.
(2) OPTIONS AND CONVERTIBLE SECURITIES. The
consideration per share received by the
Corporation for Additional Shares of Common
Stock deemed to have been issued pursuant to
Section 4.1.3, relating to Options and
Convertible Securities, shall be determined by
dividing:
4.2 ADJUSTMENTS FOR RECLASSIFICATION AND REORGANIZATION. If
the Common Stock issuable upon exercise of this Warrant shall be changed into
the same or a different number of shares of any other class or classes of stock,
whether by capital reorganization, reclassification or otherwise (other than a
subdivision or combination of shares provided for in Section 4.2), the Warrant
Price then in effect shall, concurrently with the effectiveness of such
reorganization or reclassification, be proportionately adjusted so that this
Warrant shall be exercisable into, in lieu of the number of shares of Common
Stock which the holders would otherwise have been entitled to receive, a number
of shares of such other class or classes of stock equivalent to the number of
shares of Common Stock that would have been subject to receipt by the holders
upon exercise of this Warrant immediately before that change.
4.4 CERTIFICATES AS TO ADJUSTMENT. Upon the occurrence of
each adjustment or readjustment of the Warrant Price pursuant to this Article 4,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and cause independent public
accountants selected by the Corporation to verify such computation and prepare
and furnish to Holder a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of Holder, furnish or cause to be furnished to such Holder, a like
certificate setting forth (i) such adjustments and readjustments, (ii) the
Warrant Price at the time in effect, and (iii) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the exercise of the Warrant.
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4.5 NOTICES OF RECORD DATE. In the event that the
Corporation shall propose at any time: (i) to declare any dividend or
distribution upon its Common Stock, whether in cash, property, stock or other
securities, whether or not a regular cash dividend and whether or not out of
earnings or earned surplus; (ii) to offer for subscription pro rata to the
holders of any class or series of its stock any additional shares of stock of
any class or series or other rights; (iii) to effect any reclassification or
recapitalization of its Common Stock outstanding involving a change in the
Common Stock; (iv) to merge or consolidate with or into any other corporation,
or sell, lease or convey all or substantially all of its assets, or to
liquidate, dissolve or wind up; or (v) to enter into any transaction or series
of transactions within any three month period pursuant to an agreement to which
the Corporation is a party in which greater than fifty percent (50%) of the
Corporation's voting securities (on as-converted-to-Common Stock basis) shall be
transferred;
Then, in connection with each such event, the Corporation shall send to the
Holder: (1) at least twenty (20) days' prior written notice of the date on which
a record shall be taken for such dividend, distribution or subscription rights
(and specifying the date on which the holders of Common Stock shall be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (iii), (iv) and (v) above; and (2) in the case of the matters
referred to in (iii), (iv) and (v) above, at least twenty (20) days' prior
written notice of the date when the same shall take place (and specifying the
date on which the holders of Common Stock shall be entitled to exchange their
Common Stock for securities or other property deliverable upon the occurrence of
such event).
5. FRACTIONAL SHARES. No fractional shares of Common Stock will be
issued in connection with any subscription hereunder, but in lieu of a
fractional share upon complete exercise hereof, Holder may purchase a whole
share at the then effective Warrant Price.
6. DISSOLUTION OR LIQUIDATION. In case the Corporation shall, at
any time prior to the expiration of this Warrant and prior to the exercise
hereof, dissolve, liquidate or wind up its affairs, Holder shall be entitled,
upon the exercise hereof, to receive in lieu of the shares of the Corporation's
Common Stock which it would have been entitled to receive, the same kind and
amount of assets as would have been issued, distributed or paid to it upon any
such dissolution, liquidation or winding up with respect to such shares of the
Corporation's Common Stock, had it been the holder of record of such shares of
Common Stock or other securities receivable upon the exercise of this Warrant on
the record date for the determination of those entitled to receive any such
liquidating distribution or, if no record is taken, upon the date of such
liquidating distribution. If any such distribution. If any such dissolution,
liquidation or winding up results in a cash distribution or distribution of
property which the Corporation's Board of Directors determines in good faith to
have a cash value in excess of the Warrant Price provided by this Warrant, as it
may be adjusted, then
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Holder may, at its option, exercise this Warrant without making payment of the
aggregate Warrant Price and, in such case, the Corporation upon the distribution
to Holder shall, in making settlement to Holder, deduct from the amount payable
to Holder an amount equal to such aggregate Warrant Price.
7. TERM. This Warrant may be exercised in whole or in part at any
time and from time to time on or after April 19, 1999 and shall terminate on
April 19, 2002.
8. NO SHAREHOLDER RIGHTS. No Holder hereof, solely by virtue
hereof, shall be entitled to any rights of a shareholder of the Corporation.
9. TRANSFER AND EXCHANGE.
9.1 TRANSFER. This Warrant is transferable on the books of
the Corporation at its principal office by the registered holder hereof upon
surrender of this Warrant properly endorsed. Upon such surrender, the
Corporation shall issue and deliver to the transferee a new Warrant or Warrants
representing the Warrants so transferred. Upon any partial transfer, the
Corporation shall issue and deliver to Holder a new Warrant or Warrants with
respect to the Warrants not so transferred.
9.1 EXCHANGE. This Warrant is exchangeable at the principal
office of the Corporation for Warrants to purchase the same aggregate number of
shares of Common Stock purchasable hereunder, each new Warrant to represent the
right to purchase such number of shares as Holder shall designate at the time of
such exchange.
9.2 SECURITIES ACTION OF 1933. The Holder, by acceptance
hereof, agrees that this Warrant and the shares of the Common Stock issued or
issuable upon exercise of this Warrant may not be offered or sold except in
compliance with the Securities Action of 1933, as amended (the "1933 Act"), and
then only against receipt of an agreement of such person to whom such offer of
sale is made to comply with the provisions of this Article 9 with respect to any
resale or other disposition of such securities. The Holder consents to the
Corporation's making a notation on its records in order to implement such
restrictions on transferability.
10. LOSS OR MUTILATION. Upon receipt by the Corporation of evidence
satisfactory to it (in the exercise of reasonable discretion) of the ownership
of and the loss, theft, destruction or mutilation of this Warrant and (in the
case of loss, theft, or destruction) of indemnity satisfactory to it (in the
exercise of reasonable discretion), and (in the case of mutilation) upon
surrender and cancellation thereof, the Corporation will execute and deliver in
lieu hereof a new Warrant.
11. GOVERNMENTAL APPROVALS. The Corporation will from time to time
use its best efforts to take all action which may be necessary to obtain and
keep
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effective any and all permits, consents and approvals of governmental agencies
and authorities and securities act filings under federal and state laws, which
may be or become requisite in connection with the issuance, sale and delivery of
this Warrant, and the issuance, sale and delivery of the Common Stock or other
securities issued or deliverable upon exercise of this Warrant.
12. SUCCESSORS. All the covenants and provisions of this Warrant
shall bind and inure to the benefit of Holder and the Corporation and their
respective successors and assigns.
13. NOTICES. All notices and other communications given pursuant to
this Warrant shall be in writing and shall be deemed to have been given when
personally delivered or when mailed by prepaid registered, certified or express
mail, return receipt requested. Notices should be addressed as follows:
(a) If to Holder, then to:
With a copy (which shall not constitute notice) to:
(b) If to the Corporation, then to:
With a copy (which shall not constitute notice) to:
Such addresses for notices may be changed by any party by notice to the other
party pursuant to this Article 13.
14. AMENDMENT. This Warrant may be amended only by instrument in
writing signed by the Corporation and Holder.
15. CONSTRUCTION OF WARRANT. This Warrant shall be construed as a
whole and in accordance with its fair meaning. A reference in this Warrant to
any section shall be deemed to include a reference to every section the number
of which begins with the number of the section to which reference is made. This
Warrant has been negotiated by the parties hereto and the language hereof shall
not be construed for or against any party.
16. LAW GOVERNING. This Warrant is executed, delivered and to be
performed in the State of California and shall be construed and enforced in
accordance with and governed by the laws of such State without regard to the
conflicts of law provisions of such State.
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Dated as of ________________, 1999
1ST NET TECHNOLOGIES, INC., TUMMY BUSTER, INC.,
a Colorado corporation a Nevada corporation
--------------------------------- ----------------------------------------
Xxxxxxx X. Writer, Jr., Xxxxxxxx X. Xxxxxxx
Chief Executive Officer Chief Financial Officer
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SUBSCRIPTION FORM
(TO BE EXECUTED ONLY UPON EXERCISE OF WARRANT)
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant and purchased ________ of the number of shares of Common Stock of
_________________, purchasable with this Warrant, and herewith makes payment
therefor, all at the price and on the terms and conditions specified in this
Warrant.
Dated: _________________, 199___
----------------------------------------
(Signature of Registered Owner)
----------------------------------------
(Street Address)
----------------------------------------
(City) (State) (Zip)
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ISSUE OF A NEW WARRANTY
(TO BE EXECUTED ONLY UPON PARTIAL EXERCISE,
EXCHANGE OR PARTIAL TRANSFER OF WARRANT)
Please issue ______ (number) Warrants, each representing the right to purchase
_____ shares of Common Stock of ___________, to the registered holder hereof.
Dated: ____________, 199___
----------------------------------------
(Signature of Registered Owner)
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FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under the Warrant, with respect to the number of
shares of Common Stock set forth below:
NAME OF ASSIGNEE ADDRESS NO. OF SHARES
---------------------------------------------------------------
and does hereby irrevocably constitute and appoint ________________ as
Attorney-in-fact to make such transfer on the books of _______________________,
maintained for the purpose, with full power of substitution in the premises.
Dated: ________________, 199___
----------------------------------------
(Signature)
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EXHIBIT "B"
CONFIDENTIALITY AGREEMENT
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CONFIDENTIALITY AGREEMENT
THIS CONFIDENTIALITY AGREEMENT (this "Agreement") is entered into as of
the 22nd day of April, 1999, by and between 1ST NET TECHNOLOGIES, INC., a
Colorado corporation ("1st NET") and THE CHILDRENS TECHNOLOGY GROUP, INC., a
Nevada corporation ("CTG").
RECITALS
1. PURPOSE. In the course of the relationship between 1st NET and
CTG arising out of that certain Technology License Agreement entered into by the
parties on April 22, 1999, it is essential for the parties to have a completely
open exchange of information which requires that the parties execute this
Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the covenants and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. COVENANT. The parties to this Agreement shall treat any
information (irrespective of its source or form of communication) that may be
furnished by or on behalf of the parties, whether furnished before, on or after
the date of this Agreement, confidentially and in strict accordance with the
provisions hereof.
2. CONFIDENTIAL MATERIAL. The term Confidential Material shall
include any notes, analyses, compilations, studies or other documents or records
prepared by the parties or others, which is generated from information supplied
by the the parties or its representatives. The term Confidential Material shall
not include information which either party can prove by documentary evidence:
(i) becomes generally available to the public other than as a result of a
disclosure in violation of this Agreement; (ii) was available to either party,
as the case may be, on a non-confidential basis from a source other than the
parties (provided such information is not subject to another confidentiality
agreement or other obligation of secrecy to CTG, 1st NET or another party); or
(iii) becomes available to either party on a non-confidential basis from sources
other than the parties, provided that such source is not prohibited from
transmitting the information to the parties by a contractual, legal or fiduciary
obligation.
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3. WRITTEN CONSENT. Without the prior written consent of 1st NET,
CTG will not disclose and will direct its representatives not to disclose, to
any person other than its representatives, the fact that the Confidential
Material has been made available to CTG. The term "person" as used in this
Agreement shall be broadly interpreted to include, without limitation, any
corporation, company, partnership or individual.
4. COMPELLED DISCLOSURE.If CTG or any of its representatives are
requested or required (orally or in writing, by interrogatory, subpoena, civil
investigatory demand or any similar process relating to any legal proceeding,
investigation, hearing or otherwise) to disclose any Confidential Material, you
will provide 1st NET with prompt notice in advance of such disclosure so that
1st NET may seek a protective order or other appropriate remedy and/or waive
compliance with this Agreement and CTG agrees to cooperate in pursuing any such
course of action. In the event that such protective order or other remedy is not
obtained, CTG will furnish only such information as CTG is advised to be legally
required and will exercise its best efforts to obtain assurance that
confidential treatment will be accorded to any information which is compelled to
be disclosed.
5. SECURITIES CONCERNS. CTG acknowledges that it is aware, and
agrees that it will advise its representatives who are informed as to the
matters which are the subject of this Agreement, that the United States
securities laws prohibit any person who has received from any issuer-related
material, non-public information from purchasing or selling securities of the
issuer or from communication of such information to any other person under
circumstances in which it is reasonably foreseeable that person is likely to
purchase or sell such securities while in possession of material non-public
information.
6. LIQUIDATED DAMAGES. CTG acknowledges and agrees that 1st NET
would not have an adequate remedy at law and would be irreparably harmed in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the 1st NET shall be entitled to injunctive relief to
prevent breaches of this Agreement and to specifically enforce its terms and
provisions hereof, in addition to any other remedy at law or in equity.
7. NO WAIVER. No failure to or delay in exercising any right, power
or privilege hereunder shall operate as a waiver thereof, and no single or
partial exercise of any right, power or privilege hereunder shall preclude any
other or further exercise of any right, power or privilege. The losing party
agrees to pay all costs and expenses, including reasonable counsel fees,
incurred by the prevailing party in case any such action for breach of this
Agreement is brought by them.
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8. CHOICE OF LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California applicable to agreements
made and to be performed within such State without reference to principles of
conflicts of law.
9. JURISDICTION.CTG consents to personal jurisdiction and venue in
any action brought in connection with any matter arising under this Agreement.
10. TERM. This Agreement shall remain in effect for a period of
three years from the date hereof and may be modified or waived only by a
separate writing by 1st NET that expressly so modifies or waives this Agreement.
The individual or individuals executing this Agreement are duly
authorized and empowered to fully bind the parties to the terms and conditions
of this Agreement.
1ST NET TECHNOLOGIES, INC.,
a Colorado corporation
------------------------------------
Xxxxxxx X. Writer, Jr.
Chief Executive Officer
THE CHILDRENS TECHNOLOGY GROUP, INC.,
a Nevada corporation
------------------------------------
Xxxxxxxx X. Xxxxxxx
Chief Financial Officer
